A friend in need is a real friend: Paypal has lent more than $1 billion to small businesses

Paypal Holding Inc announced that its Working Capital Loans for small businesses has lent more than $1 billion to over 60,000 small businesses in the U.S., U.K., and Australia.

Established two years ago, PayPal Working Capital is extending short-term loans for small business owners that rely on PayPal for online orders.

The company said in May that it had loaned a total of $500 million since the program began. The loans now are totaling more than US$100 million per month, or US$3 million per day.

PayPal's Head of Business Darrel Esch said, according to Venture Beat, that the reason of the rapid increase in loans comes from high demand. The small businesses simply don't have great access to capital.

Referring to the company's ability to raise loans, Esch said that the small businesses are still down 20% from the great recession and hasn't really bounced back. Traditional banks are still hesitant to lend funds to small businesses and this has prevented some from growing.

With PayPal's Working Capital Loans program, the borrowers including a mix of sellers on eBay Inc and small to medium independent merchants, can borrow up to 15% of their sales in the past year, or up to $85,000.

In exchange, Paypal charges a single fixed fee that varies depending on how fast the merchant plans to repay the loan. The company collects 10% to 30% of their daily sales until the loan is paid off. There is also a flat fee which comes out to an annual percentage rate of about 15% to 30%.

Working Capital Loans program is only available to PayPal merchants who have been using payments via PayPal for at least 90 days and has processed $20,000 via PayPal in the past 12 months.

The loans application process only takes a few minutes. If approved, the money is deposited into the merchant's account instantly.

Paypal Vice President and General Manager for Global Credit Steve Allocca said, as reported on Reuters, that about 90% of businesses to which PayPal extends credit come back for a repeat loan.

Paypal's Working Capital Loans program allows borrowers to secure funds without requiring a credit check or personal guarantees. Applicants are verified based on their sales history in PayPal.

The loans are handled by a Salt Lake City-based bank, WebBank. The loans are also insured by the Federal Deposit Insurance Corp.

Paypal is not the only payment company with loans program to small business customers, according to CNBC.

Another payments company, Square, has its loans program called Square Capital. The company has lent $225 million to small businesses since it launched the program in 2014 and is now advancing $1 million every day.